A new corporate criminal offence of “failure to prevent fraud” is set to come into effect on 1 September 2025, following its introduction in the Economic Crime and Corporate Transparency Act.

This law holds large organisations criminally liable if they benefit from fraudulent acts carried out by an employee, agent, subsidiary, or other associated person on their behalf.

A “large organisation” is defined in the legislation as meeting two out of the following three criteria:

  • More than 250 employees
  • More than £36 million turnover
  • More than £18 million in total assets

These criteria, along with the obligation to prevent fraud, apply to the entire organisation, including subsidiaries, regardless of where the organisation or its subsidiaries are based.

The goal is to make it more difficult for businesses and large organisations to ignore fraud within their operations, promoting proactive fraud prevention similar to the UK’s “failure to prevent bribery” law introduced in 2010.

Under this offence, if an organisation is prosecuted for fraud committed by someone associated with it, the organisation must demonstrate it had reasonable fraud prevention measures in place at the time of the offence. Examples of fraud include dishonest sales practices, withholding important information from consumers or investors, or deceptive practices in financial markets.

New guidance, developed with input from agencies such as the Serious Fraud Office, Financial Conduct Authority, HMRC, and the Crown Prosecution Service, provides advice for organisations preparing for the upcoming changes.

Nick Ephgrave of the Serious Fraud Office highlighted the urgency for companies to implement robust fraud prevention strategies ahead of the offence becoming enforceable, warning that failure to do so could lead to criminal investigations.

With fraud now accounting for approximately 40% of crime in England and Wales, these measures aim to help protect both businesses and the public from the severe impact of fraud.

To review the guidance, see: https://www.gov.uk/government/publications/offence-of-failure-to-prevent-fraud-introduced-by-eccta